China’s ‘Stinky Meat-Gate’

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recent muckraking report is a black eye for McDonald's and KFC, but also for the country's regulators.

"This beef is turning green," one worker said to a hidden camera. "It stinks," another chimed in. The frozen meat in question had expired more than seven months ago by November 2013, when the exchange took place. But the batch was re-cut and repackaged anyway, then stamped with a new expiration date: June 2015. This conversation stands among the damning evidence unearthed by a reporter for Dragon TV, a Shanghai-based television station, while undercover at the Shanghai subsidiary of Illinois-based OSI, a long time global supplier of major international fast food restaurant chains that include McDonald’s and KFC. (OSI has supplied McDonald’s in China since 1992 and Yum! Brands, the parent company that owns KFC, since 2008.)

The ensuing scandal has quickly engulfed the China operations of McDonald’s and KFC, two popular restaurant chains with over 2,000 and 4,400 locations in the country, respectively. Several state media outlets have pounced on what they now refer to as the yang kuaican — or "foreign fast food" — issue, with state agency Xinhua devoting a special section to what it calls "Stinky Meat-Gate." An article in nationalist state-run outlet Global Times quoted an online survey from an unspecified website, claiming that 68 percent of respondents would "never eat" McDonalds, KFC, or Subway again. Nationalistic blogger Song Zude even exhorted "all Chinese people to band together and say no to foreign trash food." But Song’s call is probably going to go unanswered; in contrast to state media’s very public hand-wringing, many Chinese consumers have seemed relatively unfazed.

That, at least, is the takeaway in the immediate aftermath of the news.Reporters for state-runChina News Service found the Beijing outlets of McDonald’s and KFC still crowded the day after the report broke. A man with the surname Lei told one reporter that he actually felt "more secure about food quality at McDonald’s, now that it is in the middle of a publicity storm." Similarly, a report by Henan Radio in Zhengzhou, a city of 8 million in central Henan province, found that business at local McDonalds and KFC restaurants was "hopping" with long lines and few seats. One McDonald’s patron admitted that she saw the news about the food scandal but was "already desensitized to this sort of thing."

The sad reality is that Chinese consumers find it difficult to trust any food establishment, which gives foreign ownership continuing credibility when it comes to quality control, scandal or no. Ma Xian, a real estate investor, wrote on Weibo, China’s major micro-blogging platform, "I can’t boycott Uncle McDonald’s or KFC, because the food is also unsafe at other restaurants, or even less safe." Tong Guangcan, a lawyer based in eastern Jiangsu province, agreed: "McDonald’s and KFC are still much better than the tiny food stalls on the street that use ‘gutter oil,’" used cooking oil that is sold or passed off as new.

Chinese citizens are shocked, of course, by the report’s findings, but have directed a healthy dollop of their ire at state regulators. In recent months, authorities have pledged "stringent supervision" of food safety and considered revising the country’s food safety laws. But observers feel the latest scandal belies those assurances. In response to state-run broadcaster China Central TV’s July 20 Weibo postabout the scandal the most popular comment read, "This year, we have relied entirely on the media to reveal problems of quality. The regulatory agency might as well just close." Another commenter wrote, "You can’t just put responsibility for weak government regulating on McDonalds and KFC." Even the Global Times, in a July 22 English-language op-ed claiming that foreign fast food chains in China need a "new attitude," acknowledged the concerns about China’s regulatory system, conceding that "quality oversight authorities are weak." Sensitive to this backlash, state media have been careful to highlight the speed with which government regulators have acted in response to the report.

McDonald’s and Yum! have apologized to consumers, but that did not stop the firms’ share prices from tumbling. For its part, OSI China released an apology stating that management is "appalled" by the report and believes it to be an "isolated incident." But a whistleblower from its quality control department produced two notebooks with details on each "expiration date extension," with a manager’s signature next to each entry.

The China operations of McDonald’s and KFC are likely to show some scars from the recent news; Yum!’s sales in China reportedly dropped 40 percent after a 2012 report that alleged that its chickens were pumped full of antibiotics, and are still recovering.But they are also almost certain to survive. Not only is the blame being spread far and wide, but these fast food chains offer something else to Chinese diners besides food. As one Weibo user wrote, "No matter what, the bathrooms at McDonald’s and KFC are definitely a public utility," adding, "We can’t live without them!" As long as Chinese consumers remain eager to get in the door, the chains’ bosses can probably rest easy.